LG Chem Enters LCD Glass Market

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$2.5 Billion LG Chem will invest KRW3 trillion (about US$2.5 billion) in LCD glass substrate production facilities, which are expected to be completed by 2018. The company is planning for an annual production capability of 50 million m2 equalling to about KRW2 trillion. LG Chem will become only the second LCD glass manufacturer in South Korea. The first is a joint venture between Samsung and Corning: Samsung Corning Precision Glass Co. (SCP). Early this year, LG Chem signed an agreement with Schott, a Germany-based materials technology company, to use its glass making technology. At first, LG Chem is expected to invest KRW430 billion to construct a glass facility in Paju, where LG Display is located.

Construction Underway LG Chem broke ground for its new LCD glass substrate production plant in Paju, where LG Display’s G7 and larger LCD fabs are located. LG Chem plans to build seven production lines for LCD glass in Paju. Production is expected to begin in early 2012. Corning’s Weeks is not worried… after the break.

No Worries Corning‘s CEO and chairman Wendell Weeks commented that LG Chem’s entrance into the LCD glass market may not pose a major threat. Here are the three main barriers to entry that Weeks shared:

  1. Obtain know-how on basic LCD glass manufacturing.
  2. Develop product that meets the industry’s stringent technical requirements.
  3. Volume product to meet customer demand.
  4. Be cost competitive with an industry that has been reducing costs for the past 20 years.

Point 1 LG Chem has an agreement to use Schott’s glass making technology. A couple of years ago, Schott attempted to enter the LCD glass market but did not gain much market share. For about two to three quarters Schott struggled to gain any major customers and eventually exited the market. Knowledge transfer is not easy but will not be an insurmountable barrier to entry.

Point 2 I’m not sure if LG Chem will need to meet the industry’s stringent technical requirements as long as it meets LG Display’s requirements. My guess is that both LG Chem and LG Display will work closely together to make sure the glass substrates work with the LCD equipment.

Point 3 Yes, it does take time to ramp up but I’m sure both LG Chem and LG Display know that and will plan accordingly. In the mean time SCP can continue supplying LG Display some glass.

Point 4 The US car industry has been manufacturing cars longer than any other. The long history certainly has not protected the US car industry from being overtaken by newcomers. The last point does not make any sense at all. LG Chem can integrate the best-of-class in terms of equipment and technology to streamline manufacturing costs and be competitive with Corning or any other company who has been manufacturing LCD glass substrates for 20 years.

Not Major I believe Weeks is telling the truth when he states that LG Chem’s entrance into the LCD glass substrate industry does not pose a major threat. It won’t. For now. The reason being that LG Chem will be solely supplying LG Display for the time being. SCP has been supplying some LCD glass substrates to LG Display but eventually will lose out to LG Chem at both locations in Paju and Gumi. Not a major threat but I’m sure it’s not pleasant for Corning.

Source: DigiTimes, Trading Markets, Reuters

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